LONDON (Reuters) – Expectations among the British public for higher interest rates in the near future cooled in mid-April, even before comments from Bank of England Governor Mark Carney last week muddied the outlook, a survey showed on Monday.
The IHS Markit Household Finance Index showed 28 percent of Britons expected the BoE to raise rates over the next three months, down from 33 percent in March.
Only 7 percent said they expected a rate hike in May – a view in sharp contrast to economists polled by Reuters earlier this week, most of whom expected rates to rise to 0.75 percent from 0.5 percent.
IHS Markit’s monthly survey of 1,500 people was conducted between April 12-16 – before Carney signalled on Thursday that the central bank may not deliver a widely expected rate hike in May because economic data had been mixed.
After that, financial market expectations swung sharply to price in a less than 50 percent chance of a more in May, which would be only the second increase since the financial crisis.
Data company IHS Markit said British households remained under significant financial pressure, despite the unemployment rate falling to its lowest level since the mid-1970s.
Furthermore, in spite of the welcome combination of households seeing inflation heading down while incomes are back on the rise, expectations about future finances turned increasingly negative, Sam Teague, economist at IHS Markit, said.
Official data last week showed inflation fell by more than expected in March, cooling to 2.5 percent from 2.7 percent in February – one reason why expectations for an imminent rate hike softened, Teague said.
That said, the vast majority of households remain confident towards interest rates rising further in the longer term.
The survey showed households’ income from employment continued to rise, albeit at a slightly slower pace than in March.
Reporting by Andy Bruce, editing by David Milliken
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